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July 15, 2008

Jet Makers Bolstered By Orders in Mideast

by Sam Savage

By Caroline Brothers

Bolstered by an inflow of petrodollars, airlines based in the Middle East announced a flurry of orders for new aircraft Monday, with Etihad Airways, Saudi Arabian Airways and a new low-cost carrier, FlyDubai, committing to spend more than $25 billion among them.

Bucking a trend that has pushed two dozen airlines, squeezed by high oil prices and falling demand, into bankruptcy this year, the carriers announced the purchase of 158 jets on the first day of the Farnborough air show outside London.

Etihad, an upmarket carrier based in Abu Dhabi founded five years ago that competes with its bigger rival, Emirates, announced an order for 45 Boeing aircraft, 10 of its 777 model and 35 of the upcoming 787 Dreamliners, worth a total of more than $9 billion at list prices.

After a competition with Boeing that the Airbus chief executive, Thomas Enders, said was "hard-fought," Etihad also said it would purchase 55 aircraft from Airbus with a total list price of $11 billion.

"The size of our order mirrors the rising prominence of the Middle East and its increasing emergence as a new focal point of global aviation," said the Etihad chief executive, James Hogan.

That deal was followed by news of a firm order from Saudi Arabian Airlines for eight Airbus A330s, a wide-bodied aircraft to be used to help modernize the carrier's fleet. The order is worth $1.6 billion at list prices.

And FlyDubai, a start-up airline backed by Emirates, placed a firm order for 50 Boeing 737-800 aircraft with a total list price of $4 billion. It plans to configure each of them with 189 economy- class seats.

"This is the first aircraft order from Dubai's first low-cost airline," the Boeing chairman, Jim McNurney, told reporters.

Charlie Miller, a Boeing spokesman, added, "three U.S. airlines have pushed back their orders," explaining how Boeing was able to produce so many new aircraft for delivery from May 2009 to 2015.

U.S. airlines are suffering from high oil prices and declining demand that is making it difficult for them to replace their older, less fuel-efficient jets. While none have yet canceled their orders outright, many are reportedly deferring their orders or delaying taking possession of new planes, when about 95 percent of their purchase price falls due.

Middle Eastern carriers, meanwhile, are picking up traffic and expanding their fleets as their economics, helped by growing oil revenue, continue to grow in a rare bright spot for the aviation industry.

The vice president for commercial operations at Emirates, Ghaith al-Ghaith, said that the new Boeing jets being bought for FlyDubai would have a four-and-a-half-hour range and serve destinations in Pakistan, India, Iran and elsewhere.

"We were looking at new and used aircraft and we wanted to start off on the right footing," Ghaith said. "A lot of people have aircraft available, that is a trend in the market."

Paolo Carmassi, president for aerospace for Europe, the Middle East and Africa at Honeywell, the world's biggest avionics manufacturer, said the Middle East was diversifying its economy away from oil production, and was benefiting from its location to capture traffic flows between Europe and Asia.

"Because of its geographic location and the lack of historical constraints, the Middle East has a chance to reshape the geography of flows from Europe to the Far East, with the Middle East as a hub," Carmassi said.